Stiglitz on the budget changes to health and education

“A crime”, “absurd”. That’s what he said.

Asked by Fairfax Media to nominate the two biggest mistakes the government could make that would take it down the American path of widening inequality and economic stagnation, Professor Stiglitz chose the budget changes to university fees and Medicare. Each would make Australia more like the US.


“Countries that imitate the American model are kidding themselves,” he said. “It seems that some people here would like to emulate the American model. I don’t fully understand the logic.”

In the lead-up to the budget Education Minister Christopher Pyne said Australia had much to learn about universities from overseas, “not least … from our friends in the United States”.

Professor Stiglitz said Australia had “a system that is really a model for the rest of the world”, and deregulating fees would move the entire system in the wrong direction.

“Trying to pretend that universities are like private markets is absurd. The worst-functioning part of the US educational market at the tertiary level is the private for-profit system,” he said. ”It is a disaster. It excels in one area, exploiting poor children.

“If you’re rich your parents can pay the fees, but if you are poor you are going to worry about how much debt you’re undertaking.

“It is a way of closing off opportunity and that’s why the US doesn’t have educational opportunity.

“While we in the US are trying to re-regulate universities, you are talking about deregulating them. It really is a crime.”

Similarly with the health system. We have one of the best systems in the world for access and outcomes. Yet we are trying to take it in the direction of the USA which sits at the bottom of the pile.

He said the typical inflation-adjusted income of a US household was lower than it was 25 years ago. The typical inflation-adjusted income of a male full-time worker was its lowest in 40 years.

“You have to say that the American market model has failed. It’s a very strong statement for someone who believes in a market economy. But at the bottom it’s even worse. The minimum wage is about where it was almost a half century ago.”

Asked what Australia had done right that the US had not, he said: “unions”.

“You have been able to maintain stronger trade unions than the United States. The absence of any protection for workers, any bargaining power, has had adverse effects in the United States.

“You have a minimum wage of around $15 an hour. We have a minimum wage of $8 an hour. That pulls down our entire wage structure.”

6 thoughts on “Stiglitz on the budget changes to health and education”

  1. On Q&A tonight.
    Panellists: Joseph Stiglitz, Nobel Prize-winning Economist; Ross Garnaut, Distinguished Government Adviser; Judith Sloan, Businesswoman, Academic and Columnist; and Christine Wong, Director of The Centre for Contemporary Chinese Studies.

  2. Gawd. If he doesn’t watch out Morrison will ‘disappear’ him on Abbott’s orders.

  3. Thanks for the heads-up, Jumpy; shall watch tonight’s Q&A. By coincidence, I went to the annual service at St. Christopher’s Chapel at Nerimbera, between Rockhampton and Emu Park, yesterday. There was an American veteran of the Viet-Nam War there so, naturally, we chatted about our post-war work experiences (what did you expect, warrie-stories? 🙂 ). He backed up what Stiglitz was quoted as saying on Unions …. but don’t get too smug, Australia is heading down the same economic dead-end as did the US, thanks to all the white-anting done by that maaate of big business, Hawkey, and all of his pals; we didn’t get long-overdue union reform, we got union corrosion. Where unions are strong and where they represent the real interests of the workers themselves, productivity and profitability is good; however, where unions are weak and where union officials are nothing but message-boys for outside interests, there is nothing but lower productivity, an I-don’t-give-a-damn attitude and no end to petty problems – don’t try telling that to the Business Council of Australia or the Institute for Public Nonsense: their religion forbids them to even consider what heretics and apostates have to say, no matter how profitable listening to it may be..

    Paul @ 2: Deck “E”, Cabin 28, Berth 53 Upper. Ration and Ablution Roster 5 for Deck “E” Starboard Amidships. Disembarkation: Mogadishu. Why did you want to know?

  4. Graham: Yep. The countries that did well during the 20th century were the ones with strong unions who had the power to go on strike and were able to maintain the workers share of GDP. Despite the claims of the entitled rich, business invests when and where they see a growing market.
    Having said this, the stagnation of the late 1970’s was partly driven by union insistence that the purchasing power of wages had to keep climbing no matter what was happening to the economy. (The stagflation was also not helped by business that expected prices to keep rising to maintain their profit margins.)
    The Pilbara unions had a significant effect on the collapse of union power. They treated their members with arrogant disdain and locked the members into very narrow jobs. (For example, tradespeople in the dry area of the Newman Beneficiation Plant were prohibited from working in the wet area.)
    Union power collapsed at Hamersley because the workers revolted and left the union.

  5. John D.: You are absolutely right about the abuse of union power; when it happens, it’s usually to boost the ego of one selfish boofhead or another and to blazes with the interests of the rank-and-file members – or else it is done on the orders of the bosses to suit their needs, done by a corrupt or gutless union official (and hands up all the kiddies who don’t believe some strikes suit a specific strategy by management). The general public would be astonished that, more often than not in my experience, rank-and-file members oppose wage rise put forward by their union officials.
    Weak unions = weak economy.

    Bechtel’s boss-cocky Kevin Borg was on WIN TV news this evening taking a “hard-line” stand against the request by biounits-of-production for more family-friendly work rosters at the new Gladstone plant.
    Poor Kevin – someone should break the news to him very, very gently that this ain’t Pennsylvania in the 1890s, that Stakhanovism in the Soviet Union and the “speedo” used by the Imperial Japanese Army to encourage prisoners -of-war to work both lowered overall productivity The possibility that a more family-friendly work roster might increase productivity without even asking for it seems to be a bit beyond this poor guy.
    Well, Bechtel can just pack up its bongos, ignore the heartfelt entreaties of Abbott and Newman to stay and just get out of Australia – they’re easily replaced …. ,, Hola! nuevo amigos!” …. Huanying xin pengyoumen!” …. “Welcome, new friends and partners, your country certainly has made great advances sine the end of colonialism, hasn’t it?” “The FLG? He just thought he was completely irreplaceable. Now, where do we start?”

  6. John D: Had a lengthy reply but have lost it – no time to rewrite it – have to watch 4Corners on power then Q&A with Stiglitz. Agree about some union officials acting against rank-and-file members’ interests and needs. For a good belly-laugh look up Bechtel’s Kevin Borg on getting tough over requests for family-friendly work rosters at the Gladstone plant (it was on this evening’s WIN TV news); the poor chump doesn’t realize his massive corporation is completely replaceable on that site, it’s one of the advantages of living in a cut-throat globalized world with a lot of new players.

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